PARIS – Société Générale and Crédit Agricole, two of France’s biggest banks, said on Thursday that they were in talks about an asset swap that would give Société Générale full control of their Newedge Group derivatives venture.
The banks, which are based in Paris, also reported earnings on Thursday that were much higher than in the period a year earlier.
But Société Générale’s increased its litigation provisions by 200 million euros, to €700 million, amid media reports that the bank and other European lenders would face fines from the European Commission for rigging benchmark euro zone interest rates.
In a conference call with journalists, Frédéric Oudéa, the bank’s chairman and chief executive, said only that the bank had been cooperating with regulators and needed to be cautious about 2013 so that it could move forward next year.
Crédit Agricole is taking a combative tone, saying it would not settle with the European Commission in the Euribor investigation, preferring to fight.
The bank’s chief executive, Jean-Paul Chifflet, told the French financial daily Les Echos in an interview published on Thursday, “We have a clean record, so I refuse the idea of a transaction that would constitute a recognition of wrongdoing by our group, when that is not warranted.”
In the asset swap, the banks said Société Générale was planning to pay Crédit Agricole €275 million, or $371 million, for its 50 percent stake in Newedge. Crédit Agricole would buy 5 percent of their jointly owned asset management company, Amundi, for €337.5 million, reducing Société Générale’s stake in Amundi to 20 percent.
For Société Générale, the announcement signals a change in philosophy, as Mr. Oudéa had previously sought to sell Newedge. In the fourth quarter of 2012, Société Générale booked a good-will write-down of nearly €380 million, mostly on the joint venture.
Taking full control of Newedge “would enable us to give our clients access to an integrated offer across global markets, from execution to prime and clearing services on both listed and over-the-counter products,” Didier Valet, Société Générale’s head of corporate and investment banking, said in a statement.
For Crédit Agricole, the Newedge move fits in with a strategy of divesting investment banking businesses to reduce risk, and comes after its sales of Cheuvreux in the second quarter and CLSA in July. It has also sold its interest in Bankinter, a Spanish lender.
For the July-September quarter, Société Générale reported that net income rose to €534 million from €90 million in the period a year earlier, when results were artificially depressed by an accounting charge on the value of the bank’s own debt.
The results fell short of the consensus forecast of a €675 million profit among analysts surveyed by Reuters.
Jon Peace, an analyst at Nomura in London, wrote in a research note that pretax profit, at €728 million, was better than the consensus forecast of €681 million, underpinned by strong equities trading. He added that there had been “no significant operating negatives beyond the litigation risk.”
Mr. Oudéa has been restructuring Société Générale along three main lines to simplify its organization: French networks; international banking and financial services; and a global unit that incorporates investment banking and private banking, among others.
To that end, he is working to raise the bank’s standing in Russia, agreeing earlier this year to acquire VTB Group’s 10 percent share in Rosbank, taking Société Générale’s stake to 92.4 percent. He has also sold Société Générale’s Japanese private banking business.
Mr. Oudéa said the bank’s restructuring would continue and that “the implementation of a new, refocused and simplified, organizational setup will help improve the group’s efficiency.”
He declined in the conference call to comment on the claim by the bank’s CFDT union that he was planning to eliminate 375 jobs in Europe and transfer some of them to India. Mr. Oudéa added that the bank was “permanently trying to adapt our business to the need to transform.”
Société Générale said its core capital ratio under Basel III, a measure of its ability to withstand financial shocks, rose 0.51 point, to 9.9 percent, in the third quarter from the previous quarter. It said its Basel 2.5 capital ratio stood at 11.6 percent.
Société Générale is second to BNP Paribas in terms of market capitalization among listed French lenders, and ranks third behind BNP Paribas and Crédit Agricole by assets.
BNP Paribas said last week that third-quarter profit rose 2.4 percent, to €1.36 billion, from the period a year earlier, as cost-cutting reduced operating expenses.
Crédit Agricole posted third-quarter net income of €728 million, a major improvement from a loss of €2.9 billion it reported in the third quarter of 2012, when it was hurt by the cost of disposing of Emporiki, its Greek unit.
Crédit Agricole out its core capital ratio under Basel III at 7.8 to 8 percent, depending on the outcome of its effort to deduct losses on the disposal of Emporiki.
In early trading in Paris, Société Générale’s shares rose 2.2 percent, while Crédit Agricole’s gained 3.1 percent.